tech-company, founder, co-founder, non-disclosure-agreementVCs typically never sign NDAs when asked because:
Considering supply and demand, i.e., the relatively high number of co-founders seeking a programmer/developer as their other co-founder…
Would you, as a programmer/developer refuse to sign any NDAs from prospective co-founders for the same reasons VCs don’t?
Your assumptions are not accurate. VCs do not want to sign an NDA just to see what your startup is about. When they do an initial scan, they just want a rough idea about what the business model is through a general value proposition, market size, product offering, investment size, return rate etc. They do not want to know your IP, how your product works, technical drawings, detailed financials, details on your marketing campaigns, how you achieve your competitive advantage or other implementation details at this stage.
If it interests them or more likely it matches the criteria of the investment firm, then they would do what is called due diligence and they wouldn’t mind signing an NDA at this stage. This is where they assess the technical feasibility and implementation plan for feasibility leading to negotiations and ending in a draft of the term sheet.
Many entrepreneurs especially beginners put everything about their startup including proprietary information into the Business Plan and shoot it off to the VC and want him to sign an NDA. The VC at this stage simply wants to know what your business is about and if it promises reasonable returns. They do not want to sign an NDA to know this since most of that information would not be dependent on proprietary or intellectual property.
I can think of some reasons why a programmer/developer should sign an NDA.
Unlike VCs, programmer/developers usually are not in a position to negotiate on similar terms as the bargaining power is usually with the cofounder.
IP is one of the main contributors to competitive advantages in tech companies. The developer is someone who is going to know the intellectual property of the company very closely, and someone who is not going to commit to protecting that advantage comes across as untrustworthy and noncommittal to the success of the company.
It makes communicating with the developers easy and you can make meaningful contributions. The company may not involve you with critical projects or projects related to the competitive advantage.
Be realistic. Just about every big tech company makes employees sign NDA. Google, Apple, Microsoft, Sony etc all have similar terms in their employment contract or make you sign a separate NDA. Professional developers who are familiar with the industry know its the norm.
Be understanding. Understand why the startup may want an NDA. The founder may have everything he or she has riding on the startup and do not want it being sunk by someone stealing the idea or talking about it prematurely. The founder may not have patented his idea yet and do not want to risk it being leaked to the public domain before it. Understand the reasons and be sympathetic.
That being said, there are founders who get overly enthusiastic about the NDA. I would suggest the following to the entrepreneurs
Equity only developers - It doesn’t really matter how the developer is being compensated or if the developer is a cofounder. If you search on this site, you would come across a few stories about cofounders talking more than they should to people and getting the company in trouble or revealing company secrets to the public. An NDA communicates that there are certain things that you should not talk about or reveal to uninvolved people.
I generally didn’t sign NDAs at the point in my career when I was primarily wearing a developer hat. For a few different reasons:
It was a bit of a red flag about the founders: It was often a sign that the founders were immature in their model of how startups, investing and businesses worked. While not universally true. The vast majority of people who have asked me to sign an NDA were of the “my idea is awesomesauce, I must hide it from sight, build in stealth mode, and launch so we all become rich” type — not understanding things like marketing, early validation, etc. etc. So I was really saying “no” to the founders, not the NDA.
It was a bit of a red flag about the company: If the normal protections of contract, copyright, work for hire, etc. aren’t enough, and the knowledge in one developers head can potentially kill a company — then the company is almost certainly already doomed. So I was really saying “no” to the company, not the NDA.
It was an unnecessary risk: During the time where I was primarily a developer the demand for good developers exceeded the supply. This still seems to hold true now. So rather than go through the hassle and expense of getting the lawyer to review the NDA, go through the usual tedious rewriting of extreme terms, etc. it’s far easier just to say “no”, and wait for the company to change their mind or move onto another opportunity.
It was overly restrictive: Most developers work for many different organisations during their working life. Most NDAs I see (unless I get them rewritten) are very broad. For example I’ve done work for three different “recruiting” companies over the years. They all had very different business models. None of the work I did at any of those companies was a cross-over in any way. However if I’d signed an NDA for the first one, I’d almost certainly not have been able to work at the other two.
It feels a little insulting: when the first interaction you have with somebody is basically “sign this, because I don’t trust you”.
Now — that’s not to say I have never signed NDAs. I do occasionally. When the company can give me a good solid reason why it’s necessary. But generally, I say “no”.
Answer: No, unless it’s contigencies meet the criteria of the investor; Viewed from a programmer.
Due Dilligence plays a large importance. Visit govt websites to give you specify details, as they change frequently. Keep your by-laws within regulation and revision is key.
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